On the Design of Artificial Stock Markets

Artificial stock markets are designed with the aim to study and understand market dynamics by representing (part of) real stock markets. Since there is a large variety of real stock markets with several partially observable elements and hidden processes, artificial markets differ regarding their structure and implementation. In this paper we analyze to what degree current artificial stock markets reflect the workings of real stock markets. In order to conduct this analysis we set up a list of factors which influence market dynamics and are as a consequence important to consider for designing market models. We differentiate two categories of factors: general, well-defined aspects that characterize the organization of a market and hidden aspects that characterize the functioning of the markets and the behaviour of the traders.